HLBank Research Highlights

Author: HLInvest   |   Latest post: Thu, 17 Oct 2019, 10:09 AM


Strategy - Sentiment Slips Below Threshold

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In 4Q18, both CSI and BCI saw a decline for the 2nd consecutive quarter in 2018 to below the 100 point optimism threshold. The CSI fall reflects our private consumption growth moderation from 8% in 2018 to 6.5% in 2019. We are largely NEUTRAL on sectors related to consumer sentiment such as aviation, auto, consumer, gaming and property, while UNDERWEIGHT on media. The BCI decline reinforces our view on moderating private investment growth and lower capex for listed-cos. Maintain KLCI target of 1,750 (15.5x PE on 2019 EPS).


Consumer sentiment falls in 4Q18. Last week, the Malaysian Institute of Economic Research (MIER) published the results for its Consumer Sentiment Index (CSI) for 4Q18 which came in at 96.8 (3Q18: 107.5). The results revealed that QoQ, the index for current household income was down and inflationary expectations edged up. Indices for jobs and financial outlook also fell QoQ but remained higher YoY.

Decline in business conditions as well. Business Conditions Index (BCI) showed a reading of 95.3 in 4Q18 (3Q18: 108.8). The QoQ fall in the BCI was due to deterioration in the Current Index resulting from the manufacturing sector as evident by the fall in indices for sales (-20%), production (-22%), new domestic orders (-52%) and new export orders (-10%). However, this was partially offset by improvement in the Expected Index from improvement in expected production and export sales. The Capital Investment Index dropped -12.9% QoQ while capacity utilisation rate fell from 82.8% to 79.2% in 4Q18.


Expected fall in consumer sentiment but... To recap, the CSI hit a 21-year high of 132.9 in 2Q18 which sequentially moderated downwards to 107.5 in 3Q18. While we expected a further downward trend in the CSI for 4Q18 due to (i) diminishing euphoria post GE14 and (ii) full quarter impact of the end of the tax holiday, the reading below the optimism threshold of 100 was a slight negative surprise.

Weaker consumer sentiment reflected. In our economic projections, we have reflected the decline in consumer sentiment via a downward moderation in private consumption for 2019 at 6.5% from 8% in 2018 (2017: 7%). This is due to (i) 3 month tax holiday in 2018 which pulled consumption forward, (ii) consumers adjusting to SST2.0 and (iii) lower income boosting measures in Budget 2019 vs 2018. Nonetheless, the increase in minimum wage this year to RM1,100/ month (from RM1,000) will benefit 8% of the current 14.9m workforce which should provide support to private consumption. For our equity coverage, we are largely NEUTRAL on sectors related to consumer sentiment such as aviation, automotive, consumer, gaming and property, while being UNDERWEIGHT on media.

Moderation in private investment. The BCI decline in 4Q18 reinforces our expectations for private investment growth to moderate in 2019 to 4% from 4.8% in 2018 (2017: 9.3%). Capex for companies under our coverage have generally been guided to be lower in 2019, consistent with the BCI readings.

Retain KLCI target of 1,750. While the KLCI is currently trading at around -1.5SD from its mean PE, this comes on back of lacklustre earnings growth of -0.1% for 2018 and +3.3% for 2019, below its post-GFC CAGR of 7%. We maintain our KLCI target of 1,750 based on 15.5x PE (-1SD) tagged to 2019 EPS. While Malaysia’s long term reform story is appealing, the near term headwinds are strong as it walks a thin rope, balancing between growth and fiscal prudence.

Source: Hong Leong Investment Bank Research - 7 Feb 2019

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speakup https://www.thestar.com.my/news/nation/2019/02/07/bersatu-defends-marzuki-at-least-he-didnt-rape-or-steal/
so now we know, it is OK to lie in Malaysia Baru (but just cannot rape or steal)
07/02/2019 4:53 PM



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